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ECB action fails to ignite euro zone economy

Euro zone business activity growth slowed in April, according to the latest survey of the services and manufacturing sectors by Markit which showed a gap between growth in France and Germany's economies.

A flash composite index of services and manufacturing activity in the euro zone fell to 53.0 in April, down from 53.1 in March, Markit said on Friday. The index came in below expectations for a reading of 53.2, according to analysts polled by Reuters. The 50-point mark separates expansion from contraction.

"The euro zone continued to show only modest growth in April, according to the latest flash PMI data," Markit said, adding that the latest index suggested that the pace of economic growth at the start of the second quarter was marginally weaker than the average seen in the first quarter.

Ford factory in Cologne, Germany.
Maximilian Stock Ltd | The Image Bank | Getty Images

Commenting on the survey, Chief Economist at Markit Chris Williamson said that the euro zone economy remains "stuck in a low growth rut with the PMI once again signaling GDP growth of just 0.3 percent at the start of the second quarter, broadly in line with the meager pace of expansion seen now for a full year."

"A failure of business expectations to revive following the ECB's announcement of more aggressive stimulus in March is a major disappointment and suggests that the modest pace of growth is unlikely to accelerate in coming months."

Earlier, France and German PMIs showed divergence between the region's two largest economies. Breaking with tradition, it was France's turn to see an uptick in composite business activity rather than Germany, which saw a slowdown in business activity growth as a whole despite improved manufacturing performance.

Markit's flash composite PMI for Germany came in at 53.8 in April, down from 54.0 in March and a 9-month low. Breaking down the figures, services activity came in at 54.6 (down from 55.1 in March) and manufacturing activity climbed to 51.9 (up from 50.7 last month).

In France, private sector output rose marginally in April, Markit said, with the composite index rising to 50.5 in April from 50.0 in March although gains in services activity were offset by a drop in France's manufacturing output index.

Howard Archer, chief U.K. and European economist at IHS Global Insight, said "there was little for the ECB to cheer in these services."

"However, the ECB is stressing that patience is needed as its enhanced stimulative measures announced in March are still to be fully enacted and will take time to impact. Slightly good news for the euro zone saw overall input prices rise modestly for the first time since December."

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